I'm seeking to understand how my bank calculates the interest on my various deposit accounts (Money Market, Interest Checking, Savings, Certificate of Deposit) in order to simulate and predict it to a very precise degree. So far I was not able to find any formulas or calculations in the Truth In Savings mandated disclosure that accompanies any newly opened account.
When speaking with a customer representative they did detail the computation method with some bit of precision.
- The interest is computed to 4 significant digits if less than a penny and the fourth digit is rounded using the 5th and added to the principal
- The interest is computed to 2 significant digits if greater than or equal to a penny and rounded using the 3rd digit and added to the principal
- If the interest accumulated within the span of a calendar month is less than a penny, the accrued interest is reset to zero and not credited to the account
- A digit is rounded up if the digit to its right is 5 or greater
- A year consists of 365 days even on leap years
This is a bank that compounds daily. I failed to ask them how many significant digits their periodic rates and APRs used in computing contain and if any rounding rules apply to those.
My question is there a common term for these practices or a typical disclosure document I can request from banks to get this information? Is it regulated in any way or our banks free to set their own policy? I know in quoting interest rates on deposit accounts banks have to use a 365 day based APY due to the Truth in Savings Act here in the US, and conventionally they quote that as a percentage with two significant digits, but I don't know whether that is mandated as well.
My end goal is to open a small deposit account and accurately predict and model the day to day value of the account as if I were the bank. For fun, I guess at the moment.